Problem 16-46 Solve for Master Budget Given Actual Results (LO 16-2, 4)

A new accounting intern at Gibson Corporation lost the only copy of this period's master budget. The CFO wants to evaluate performance for this period but needs the master budget to do so. Actual results for the period follow:

Sales volume		130,000	units
Sales revenue	$	873,600
Variable costs
Manufacturing		192,192
Marketing and administrative		78,624
Contribution margin	$	602,784
Fixed costs
Manufacturing		251,200
Marketing and administrative		146,000
Operating profit	$	205,584

The company planned to produce and sell 110,500 units for $6.00 each. At that volume, the contribution margin would have been $464,100. Variable marketing and administrative costs are budgeted at 10 percent of sales revenue. Manufacturing fixed costs are estimated at $2.40 per unit at the normal volume of 110,500 units. Management notes, "We budget an operating profit of $1.00 per unit at the normal volume."

Required:

a. Construct the master budget for the period. (Do not round intermediate calculations.)

GIBSON CORPORATION
Master Budget
Sales volume		units
Sales revenue
Variable costs:
Manufacturing
Marketing and administrative
Contribution margin	$0
Fixed costs:
Manufacturing
Marketing and administrative
Operating profit	$0

b. Prepare a profit variance analysis. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

GIBSON CORPORATION
Profit Variance Analysis
	Actual (130,000 Units)	Manufacturing Variances		Marketing and Administrative Variances		Sales Price Variance		Flexible Budget	Sales Activity Variance		Master Budget
Sales revenue	$873,600
Variable costs:
Manufacturing	192,192
Marketing and administrative	78,624
Contribution margin	$602,784
Fixed costs:
Manufacturing	251,200
Marketing and administrative	146,000
Operating profit	$205,584